The American film and television industry paid out $49 billion to local businesses across the country in 2016, according to the Motion Picture Association of America.
The MPAA, which represents the six major studios, announced on Tuesday that the film and television industry supported 2.1 million jobs in 2016 — up 100,000 from the previous year. Total wages paid out rose by $4 billion to reach $139 billion, with an average salary 42% higher than the national average.
The MPAA also said jobs directly related to the production and distribution of films and TV shows increased by 24,000 over the prior year to nearly 700,000 jobs.
“While the awards season often focuses on glitz and glamour, it’s important to recognize that the impact of America’s film and television industry extends far beyond the red carpet,” said Charles Rivkin, chairman and chief executive officer of the MPAA. “This industry is one of the nation’s most powerful cultural and economic resources, supporting 2.1 million hard-working Americans in all 50 states and hundreds of thousands of local — mostly small — businesses.”
The MPAA explained that its annual update covers 2016 rather than 2017 due to its main employment data source, the Bureau of Labor Statistics, releasing the necessary data near the end of each year for the prior year. It also said the rapid growth of creative content development and the industry’s digital transformation has bolstered the economic contributions with an estimated 454 original series airing in 2016.
It also said the number of businesses that make up the film and television industry rose by 5,000 to hit 93,000 in 2016 and said 87% of those are small businesses that employ fewer than 10 people.
“In all, film and television supports 400,000 local businesses, with the industry making $49 billion in payments to these enterprises,” the MPAA said. “The U.S. film and television industry is also a key player in markets around the world, with demand for creative content continuing to grow. The industry registers a positive balance of trade in nearly every country with $16.5 billion in exports worldwide.”
There were nearly 342,000 jobs in the core business of producing, marketing, manufacturing, and distributing motion pictures and TV shows with an average salary of $90,000 — 68% higher than the average pay nationwide.
To all you rich rascals out there, I hope you didn’t blow it all in one place!
The program had been giving significant tax breaks to investors in shows shot in the U.S. for more than a decade, but it will end on the first day of 2017. For Hollywood, it’s the first casualty of the new political reality.
Enacted as part of the American Jobs Creation Act of 2004, Section 181 of the Internal Revenue Code was designed to stem the flow of runaway production to foreign countries that were, and still are, offering generous tax breaks to lure away American productions.
The MPAA has called Section 181 “an important provision that promotes domestic film production,” but it was not a permanent fix; it had to be renewed by Congress every two years. And this year, the lawmakers let it die. A House bill was introduced to extend it, but it died in the Ways and Means Committee. The incentive still could be renewed retroactively next year or the year after, as it was in 2010, but under a Donald Trump presidency, there might be little political will to do so.
“It was one of the greatest jobs acts we had,” lamented attorney Hal “Corky” Kessler of the Chicago law firm of Deutsch, Levy & Engel, one of the industry’s leading experts on the federal tax break. He’s still hopeful, however, that Congress will see the merits of reinstating it. “At some point it will come back,” he predicted. “I don’t know if it will be next year or the year after, but by the end of this year, it’s going to die.”
The Directors Guild of America, which played a key role in lobbying for Section 181, also weighed in on the program’s pending demise.
“In the face of film and television production leaving the U.S., the DGA led the fight for the creation of Section 181 as part of the Jobs Act of 2004, and has continued the fight for its improvement and extension five times since then,” the guild said in a statement to Deadline. “We are disappointed in the failure of the current Congress to extend the larger tax package of which 181 is a part. We will continue our efforts to push for legislation that keeps the U.S. competitive in film and television production.”
Passed to encourage film and TV production to stay in the U.S., the law substantially reduced the risk of investment by giving investors a 100% loss against taxable income in the year or years the money is spent. For example, a producer or investor who put up $1 million for a film who was in the 30% tax bracket could save $300,000 in taxes, while someone in the 35% bracket could save $350,000. Coupled with a share of the tax incentives offered by various states, a smart investor can be assured of a 50%-70% return on investment regardless of whether the project was a success.
The IRS allowed this deduction on the first $15 million invested in every qualified project – and up to $20 million if it’s shot in certain low-income areas. But not anymore.
The law was a much needed, if tepid, response to the flood of shows fleeing to Canada to take advantage of 35% tax credits there – an exodus triggered by the “cultural exemption” contained in the 1994 North American Free Trade Agreement that allowed Canada to subsidize its film and TV industry while undermining America’s.
Last year, when it was lobbying for its extension, the MPAA reminded the co-chairs of the Senate Finance Committee that “Congress enacted Section 181 in light of the job-creation, economic growth and other benefits that flow from filmmaking in the United States. … Recognizing the economic benefit of film production to their local economies, many of our major trading partners, (e.g., Australia, Canada, France and the United Kingdom) offer significant wage credits and other above-the-line incentives to attract film productions and jobs abroad.”
Section 181, the MPAA told the senators, “helps to respond to these foreign film incentives and encourages feature film and television productions to remain in the United States.”
An assistant professor at USC who challenged the prevailing theory that state film tax incentives are good for their local economies has come under personal and professional attack by the MPAA, the industry’s leading booster of state tax incentives.
Last month, Michael Thom published a study titled “Lights, Camera and No Action” that found that state incentives programs aimed at luring productions away from California and New York had “little to no sustained impact on employment or wage growth” in their states. His study found that since 1997, the film and TV industry has received more than $10 billion in state tax subsidies.
“The incentives are a bad investment,” Thom wrote on USC’s website. “States pour millions of tax dollars into a program that offers little return. On average, the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost non-existent. Market share and industry output didn’t budge.”
The MPAA, however, has accused Thom of “academic malpractice,” stating that his study is so flawed that it not only tarnishes his own reputation but USC’s as well.
“It is troubling and without excuse that such a false and misleading study, without statistical and intellectual foundation, would be recklessly promoted by an otherwise respected educational institution such as USC,” Vans Stevenson, the MPAA’s SVP State Government Affairs, said in a statement. “It severely tarnishes the reputation of the university as well as the academic credentials of the author. This is academic malpractice, designed to make a provocative statement rather than offer sound policy analysis.”
According to the MPAA, “States and countries with strong production incentives report positive impacts on growth and employment, and studies have measured this impact.” One of the studies it cites was performed by the HR&A consulting firm “to support key policy goals on behalf of the Motion Picture Association of America.”
The MPAA pointedly disparaged USC, as well. “Last month, the University of Southern California promoted a paper … which reached the odd and attention-grabbing conclusion that film production incentive programs have little to no impact on film industry employment and output,” wrote Julia Jenks, the trade group’s VP Worldwide Research. “This runs counter to the landscape of studies that have measured the direct employment impact of key state production incentive programs using Bureau of Labor Statistics data. Unfortunately, the new Thom paper has fundamental scientific flaws that undermine the paper’s credibility and render its conclusions completely unfounded.”
Thom’s study evaluated the impact of an array of tax incentives employed by more than 40 states to entice film and television TV out of California and New York on labor and economic conditions from 1998 through 2013. “Results suggest that sales and lodging tax waivers had no effect on any of four different economic indicators,” his report found. “Transferable tax credits had a small, sustained effect on motion picture employment levels but no effect on wages. Refundable tax credits had no employment effect and only a temporary wage effect. Neither credit affected gross state product or motion picture industry concentration. Incentive spending also had no influence.”
Wrote Jenks: “Overall, the Thom analysis reflects a lack of understanding of motion picture production and how incentives relate to those productions. The claims that transferable and refundable tax credits will have different impacts on employment, wages, and other metrics are not clearly explained in the Thom paper and are implausible based on how transferable film credits actually work, undermining the conclusions and interpretations of the results.”
According to the MPAA, Thom’s study “looks at the wrong jobs data” to reach its conclusions. “The paper’s baseline assumptions misunderstand how transferable film credits actually work,” the MPAA said. “The analysis ignores how the size of a state’s film production incentive program could impact the amount of production as well as correlations between program size and its potential impact on employment, wages, and other outcomes. The data also does not account for changes in size in programs over time or differences in the same type of incentives offered in multiple states. Treating all state film production incentive programs equivalently and ignoring the variability of spending by programs (from state to state and from year to year) falsely equates programs that are very different in terms of size and potential impact.”
The MPAA says that “out of the 1.9 million U.S. jobs supported by the film and television industry, direct industry jobs generated $50 billion in wages and nearly 305,000 jobs in core businesses related to producing motion pictures and television shows. These are high quality jobs, with a traditionally unionized workforce and an average salary of $92,000, 79% higher than the average salary nationwide. The amount of TV shows produced has been growing, and films produced remains high.”
Jenks wrote that although Thom described his analysis as focusing on motion picture production, “The Bureau of Economic Analysis data being used to study the effect of film production incentives is aggregated data that includes movie theater and sound recording industry jobs and wages. A ticket taker at the local cinema or an engineer at a recording studio should not be affected by film production incentives. Their inclusion in the study adds noise that dilutes and biases the results of the model.”
“To adapt the proverbial apples-and-oranges analogy, in this case you are looking for some oranges buried within a large cart of apples” she wrote, “Movie theater jobs account for an average of 59% of all motion picture industry-related jobs, as categorized by the Bureau of Labor Statistics, which is the source for granular employment data, outside California and New York. This percentage rises as high as 80 or 90% in certain states. Additionally, the measured sound recording industry jobs declined 45% nationally during the period covered by the research. Moreover, the dataset does not include freelance workers that are prevalent in motion picture production.”
Jenks also said that Thom’s analysis “ignores how the size of a state’s film production incentive program could impact the amount of production as well as correlations between program size and its potential impact on employment, wages, and other outcomes. The data also does not account for changes in size in programs over time or differences in the same type of incentives offered in multiple states. Treating all state film production incentive programs equivalently and ignoring the variability of spending by programs (from state to state and from year to year) falsely equates programs that are very different in terms of size and potential impact. States with low or no real spending in their production incentive programs may be obscuring the effects of strong, well-funded programs in the overall model.”
To illustrate the “flaws” in the design of Thom’s study, Jenks offered a music school analogy. “Let’s say you wanted to know whether school music programs increase the number of children who play music,” she wrote. “So you took all schools nationally and categorized them based on a technical category, i.e. whether they had a public school or private school music program each year – but ignored whether ‘program’ simply meant there was a piano in the school or whether the school was like Juilliard, the pinnacle of musical instruction. And then you measured the change in the number of students who participate in any extracurricular activities each year across the public/private categories. It should be self-evident that any conclusions drawn from this research would be unreliable.”
Jenks also criticized Thom’s study for not mentioning the historical role that incentives in other countries, such as Canada and the United Kingdom, have played in fueling state efforts to keep production and jobs in the U.S. “Incentive programs outside the US are likely to spur program creation and impact spending levels by states that wish to attract productions, and the impact of international competition should not be ignored,” she wrote.
This story from the LA Times. Also article on the passing of Nick Counter below.
Studios and theaters clash over FCC waiver November 4, 2009 | 6:22 pm
The nation’s theater owners and movie studios are once again at odds when it comes to the future distribution of movies.
In regulatory filing today, the Motion Picture Assn. of America, the chief lobbying group for the major studios, restated its support for a waiver of current Federal Communications Commission rules that would clear the way for a technology that would allow consumers to watch movies at home close to or during their theatrical release. The so-called selectable output control technology would prevent the illegal copying of movies, which has been a major stumbling block to delivering first-run movies directly to consumers.
“Many of us love movies, but we just can’t make to the theater as often as we’d like. That is especially true for parents of young children, rural Americans who live far from the multiplex and people with disabilities that keep them close to the home,” MPAA Chairman and CEO Dan Glickman said in a statement. “Having the option to enjoy movies in a more timely fashion at home would be a liberating new choice.”
Theater owners, however, don’t see it that way. The National Assn. of Theater Owners is opposed to the waiver and reiterated its opposition today. Theater owners are concerned that narrowing or collapsing the current window between when a movie hits theaters and when it comes on DVD or video-on-demand would cut into box office revenues and erode the quality of movies shown on the big screen. The current window is about four months.
“We don’t argue against the use of anti-piracy technology if movies were to go to the home earlier,” said John Fithian, president of the National Assn. of Theater Owners. “But they [the MPAA] aren’t telling the FCC or anyone else how early they want to go, so there’s no way of telling what the impact is on the cinema industry and our consumers.”
Though the MPAA has been pushing this for some time, the issue has heated up again as various industry and public interest groups weigh in. Fithian himself said he would meet with the FCC on Thursday to state his group’s views. Several other industry and consumer groups have opposed the waiver, including the consumer group Public Knowledge, which maintained that the technology would shut down the types of devices consumers could plug into their TV sets. The MPAA disputed that claim in its filing today.
By Richard Verrier
Huh has the Ol’ Dog flipped his lid. This is strictly a MPAA/Theater Owners issue and has nothing to do with actors or the Screen Actors Guild. To the contrary I would submit to you it is just another step in our employers long range plan to eliminate another actors revenue stream. Pay TV residuals.
The following from our basic agreement with producers; it is under Supplemental Markets.
So, you still think this is only a producer/theater owner issue?
If this move by the MPAA is successful and residuals are to be saved the SAG membership needs new leadership. Do you think those USAN/UFS members, currently in power, with their go-along-to-get-along attitude, would stand up to employers to save Pay TV residuals? Hell, they caved in to producers on New Media residuals, force majeure, clip consent, and they wouldnt even stand up for our senior members sacrificing a revenue stream for them by handing over to producers all rights on the internet for pre 1971 features and pre 1974 TV shows without paying residuals. Oh, and of course, they agreed to let producers to do NON-UNION productions for the Internet.
But, but then they didn’t accomplish all of this alone, an apathetic membership voted for it. Well, that is to be expected isnt it? Weak, indecisive leadership leads to apathetic membership.
A.L. Miller SW Editor & Chief
By DAVE MCNARY
Nick Counter, recently retired as chief of the Alliance of Motion Picture & Television Producers, died Friday at West Hills Hospital in Woodland Hills. He was 69.
The cause of death was not available.
Counter had stepped down as the AMPTP president in March after 27 years as the chief negotiator for the studios in labor negotiations. He was succeeded by longtime VP Carol Lombardini, who was recently promoted to the presidency.
“Nick’s passing is a profound loss for the entire entertainment community,” Lombardini said. “We will all remember Nick for his passionate leadership, which was always guided by a resolute sense of fair play and an earnest desire that everyone come out a winner. Nick had a particular proficiency for developing consensus among diverse points of view and he used this skill to great advantage in negotiating hundreds of collective bargaining agreements that led to a sustained era of labor peace.”
Counter was a Pheonix native and raised in the Denver area. He attended the University of Colorado and played on the football team as a running back.
Counter had been the AMPTP president since 1982 and served as chief negotiator on 311 labor deals.
After the 1988 writers strike, the low-key Counter helped maintain labor peace in Hollywood for much of his tenure at the AMPTP. That ended in 2007, when he took a tough stance on behalf of the companies over residuals and new media compenation. The 100-day walkout ended in February 2008.
Directors Guild of America Secretary-Treasurer Gil Cates and National Executive Director Jay D. Roth said, “It is with great sadness that we learned today of the passing of Nick Counter. Although we sat on opposite sides during labor negotiations, Nick was a friend, man of honor and worthy adversary, doing his best to represent his constituents.”
Counter is survived by his wife, Jackie; his daughter Samantha and son-in-law, screenwriter Alex Kurtzman; his son, Nicholas; and grandson, Jack. In lieu of flowers, the family would prefer donations made to the Motion Picture & Television Fund (MPTF) or the Entertainment Industry Foundation.